Thinking Of Buying An Online Business? Jaryd Krause Discusses All You Need To Know
In the podcast:
00:42 – Episode & Guest Overview
02:18 – Perspective in Buying A Website & Scaling It
04:10 – Best Type of Website To Purchase
11:10 – Low Hanging Fruit In Buying Different Businesses
12:34 – Process in Revealing Suppliers in E-Commerce Sites
13:36 – The Due Diligence Process
17:55 – Backlinks Removed on Bought Sites
22:47 – Importance of Email List
25:58 – Financial Due Diligence
28:41 – Marketing Side of Due Diligence
29:44 – Competition of the Website in Terms of its Industry
31:13 – Jaryd’s Advice to Beginners in the Buying Space
33:42 – How Business Are Valued at Certain Price Points
40:40 – Where To Buy and Sell Websites
41:25 – Learn More About Jaryd Krause
Episode & Guest Overview
Ilana:
Welcome back to another episode of Teach Traffic. This is episode number 67 and I’m your host, Ilana Wexler. And today we’re talking all about the due diligence that you need to do and what you need to look for before buying an online business.
Now I have talked about This whole concept of buying an online business versus building one back in Episode 44. But we talk about different things. In this episode. I’m interviewing a guest called Jaryd Krause.
And we’re going to talk about all the different monetization options that you could look for. So the different types of businesses monetize different ways, how to do proper due diligence, some low hanging fruit to look for the various price points to consider advice if when Jaryd was just if he was just starting out, and really everything in between.
So if you’ve ever considered buying an online business versus building one from scratch, you definitely want to listen to this episode. And we’re going to make show notes available for you at teachtraffic.com and I really hope that you enjoy this episode.
And as always, if you need help with mastering paid traffic, you can check out our online community at teachtraffic.com/training.
I’ve actually launched a low-end option of an Ask me anything for just $19 a month. So you can check that out. And but yeah, let’s get stuck into today’s episode.
Perspective in Buying A Website
Jaryd Krause:
Everybody’s got a different perspective on why they would buy a website and what they would do to scale it. So yeah, I help people buy and scale and yeah, let’s let’s jump in.
Ilana:
Awesome. All right, so why don’t we touch why would somebody consider buying a site versus building a new one completely from scratch? What sort of the main reasons why?
Jaryd Krause:
Well, it takes time to really start to get traction with the website business in terms of traffic, and getting your marketing down and your sales down your sales process.
Well, it takes time to really start to get traction with the website business in terms of traffic, and getting your marketing down and your sales down your sales process.
So a good structure of SEO and all these different things and components that come with owning an online business, it can really take time to get data on what’s working, what’s not working weeded out, to get a higher functioning website, and all of those aspects I just mentioned.
And it can take a lot of time, effort, energy and money. And then for those people who have done this before, they already know, kind of know what sort of strategies are going to work, although they can just supersede that and achieve their results a lot faster if they go and buy something.
And then for those who don’t know how to start an online business, or haven’t done it before, I mean, this value right of startups is very, very high. It’s over 90% of startups fail.
And that was one of the reasons I sucked at the start. I started two different website businesses. I learned a lot through the process that is realizable if I can skip that value, right. Well Go and go and buy something that is in that 10%. And already has a proven track record of making money every month, and then just adding on my skills to that.
Best Type of Website To Purchase
Ilana:
Yeah, nice. I mean, I personally can see the merit in buying a site versus building it is the opportunity cost of money and time spent in building one way most people realize that you pay with money or with time, but often you do pay with both in building a new one from scratch versus buying an existing one, though.
What would you say? I mean, there’s so many different types of websites that you can possibly buy in terms of the monetization strategy, be it like an ecommerce site versus a content site versus an affiliate site?
What would you say is the best type of website to buy? So let’s say you know, one of our listeners says, yep, I’ve committed to buying a site and they’ve sorted exploring the possible options, which type of website do you think is the best one to buy? Or is there a best one?
Jaryd Krause:
Yeah, that’s such a good question. And it’s, I wouldn’t say there’s a best one for anybody to buy . It’s very per person basis and individual. So, like I mentioned before, I learned some skills in SEO and a bit of digital marketing when I first started my sites, and I learned a lot about drop shipping.
And so I went down the route of finding a site that was within the drop shipping niche, and I was either gonna have a drop shipping ecommerce type business, or one that was either a content type membership based business that was within drop shipping, so I went to the niche rather than the business model.
Now, that’s not necessarily always the most important way to go or the best way to go because sometimes people can become quite fixated on the niche and they struggled to find something that’s within that niche.
And then we have other people that throw around the words like you need to be passionate about the niche and what you’re working in. And whilst that has some merit is also, you know, it’s a double edged sword where people can be so passionate about something, they can have a bit of a blindfold on to some of the things that aren’t working the business and run into the ground as well, which I’ve seen happen.
And so it really depends on the person who’s purchasing the business and finding passion in the type of work that they would do. So for example, I may not love drop shipping, but I may love the niche or vice versa. I may not love the niche.
Say for example, I bought a business before that hasn’t been a niche that I absolutely love, but I love the business model. And I love that I could dig in and do some paid marketing, some paid traffic like you do and all your listeners are into as well.
And then you’ve got other people that have learned a little bit about it. SEO and they go well, I’d probably prefer to do organic traffic, and, you know, create content and just run an affiliate site like that, or a content website lot like that.
So I don’t think there’s one particular business model that’s better for everybody. I feel it’s better for that person who’s going to invest in a website to understand what role they’re going to love about driving the business. And that’s going to help them focus on what type of business model to go down.
Ilana:
For my apologies, that was probably a bit of a difficult question and a gray area.
Jaryd Krause:
It’s such a good question, though. Like, it’s, I wouldn’t say it’s a thing to apologize about, because everybody comes to me and says, “Hey, Jared, what sort of business should I buy?”
And that’s the answer that I give them every single time. It’s really dependent on on who that is. So it’s actually In fact, you know, quite the opposite was a great question.
Ilana:
The thing is, though, like so let’s touch on you know, my expertise and obviously listeners of this podcast are into traffic specifically paid traffic.
Let’s sort of, let’s pretend that our target customer is somebody who has paid traffic skills, what then would you say is a good type of business to buy?
Would it be a business that is currently not doing paid traffic and then that’s a good bolt on of their skills that they could add, or a business that is already doing paid traffic and possibly they could be that person could do it better?
Jaryd Krause:
I would say both. So you’ve got in terms of business model, I would probably suggest sticking away from content, websites like publishing websites. And the reason being is because, you know, the margins aren’t so high on some affiliate products and ads and stuff like that and to run Pay Per Click campaigns, you know, you may not be getting the margins.
You actually want and then so I’ll probably stick against that but with you know that in mind you’ve got an ecommerce different different types of e commerce website businesses and say SaaS membership website businesses that may do some marketing or you know, don’t do it at all.
But you could add to your skill set to that. So when you’re looking for one of these boots up businesses to buy, look at the opportunity that’s involved with your skill set. And then you can plug that in and really, you get a higher return on your investment from those particular types of websites.
Ilana:
I one thing that springs to my head is if let’s say I were to buy a content site that ranks organically and gets a lot of SEO traffic, a good bolt on for me would be well, I can create a pretty good retargeting campaign just to leverage that existing traffic that that sites are really getting and possible.
I create my own info product for it and then hit the ground running that way. So illuminating the whole, as you say the slim margins of affiliate stuff and then the whole concept of buying traffic with enough of that margin, possibly so your own product and then bolt that on when you reckon.
Jaryd Krause:
Yeah that’s such a good strategy is like when you can say sites that are doing cold traffic and they’re just getting some cold traffic in but they’re not really utilizing remarketing and pixel link people and haven’t got a good remarketing campaign happening.
You can come in and you know, with that skill set, you can really work that business to get a better return than the previous owner was, you know, doing with their ads, and vice versa.
Maybe they were doing remarketing and now just exhausted that you know, that remarketing list or that audience and the frequency is quite high on the ads.
You could come in and use your call traffic skills to boost that traffic amount up. So then you can also increase that audience that you’re remarketing to as well. Hmm.
Low Hanging Fruit In Buying Different Businesses
Ilana:
What would you say would be some low hanging fruit? Like if you were looking at buying a handful of different businesses, what some low hanging fruit that you would look for in certain businesses to buy?
Jaryd Krause:
Yes certainly would be what we just mentioned there is that somebody may look at a business with the lens of “Hey, I’ve got good skills with paid marketing”. That’s a low hanging fruit, seeing where that marketing hasn’t been done to the level that you’ll look at that you have the skill set that you have.
And you could come in and use your skill set to change that marketing or add your flair to that marketing.
As the same goes with content websites and not having an email list. So many content websites actually so focused on organic traffic that they’re so susceptible to a Google algorithm change.
And they don’t realize that they can reduce that risk by building out an email list. So if there isn’t an email list that is a huge, low hanging fruit you can add to the business.
And then also for those sites say even if it is in e-commerce, and I do have an email list is asked how often do they email?
Or do they have an abandoned cart sequence set up? How often are they promoted to the list? I like engaging with open rates and all that sort of stuff, and there’s some really good low hanging fruits.
Process in Revealing Suppliers in E-Commerce Sites
Ilana:
Yeah, nice. With people buying an e-commerce site, is it pretty typical that they reveal who their suppliers are, etc? Is that sort of…
Jaryd Krause:
it’s a can so you need to sign an NDA, so a nondisclosure agreement and you kind of want to work out.
If you want to be in contact with the suppliers to work out you know if that contract is still going to apply like, and at the same rates is still going to apply it, they’re still going to do the same service that they’re running for the previous owner.
So I think it’s really important and to sign an NDA and also to have your previous cell assign an NCA as well, so they can’t just go away and, and grab that, you know, use that same wholesaler or supplier, or whatever it is, and start another business using the same person, but in direct competition with you since you’ve just bought their site.
So that’s a huge thing to understand and remember, as well.
The Due Diligence Process
Ilana:
I would imagine, you know, you’re sort of embarking on probably an expensive purchase, obviously, depending on the size of the business, we’ll get to and I’ll sort of talk about price points a little bit later.
But I would imagine a huge part of this process is the due diligence process.
Do you want to sort of unpack what due diligence people need to do in order to really go in armed with the knowledge that sort of the buying a good a good website and that sort of sound and that sort of dodgy practice hasn’t been done to sort of touch on some of those things that people should look for?
Jaryd Krause:
Yeah, certainly, this is my main, this is the main thing that I teach within my community is a whole course on how to buy business.
And it’s just focused solely on due diligence and the right questions to ask the seller depending on the type of business model you are buying, yeah, so the main key areas of due diligence are SEO, due diligence, marketing, due diligence, financial due diligence, and the competition.
So then they’re the key types of things you need to be checking. So through SEO, you really need to be looking at what the traffic’s doing, is it trending up, down, sideways, and most importantly, asking the question of why, like, why is traffic training that certain way.
For example, sometimes you will Look at businesses and they say that the business’s traffic is trending down so heavily through certain periods of the year and they just think, Oh, this business is a bit shaky and fluctuating.
And it could be a business that is an e commerce space selling swimwear.
And then when it hits summer, like they’ve turned away and don’t buy the business hits someone, they go, “Wow, okay, that business went through the roof, and they may just miss it on a really good opportunity because they didn’t understand traffic was dipping down because of seasonality”.
Same thing with Google algorithm updates, you need to check if the site has been rocked by Google change and all the algorithm changes within the SEO. And yeah, looking at the trap.
Ilana:
Alright, on that, like, let’s say a site has been rocked by an SEO algorithm update, would you typically see something like a sort of a cliff dropping in traffic or a gradual decline or increase depending if there’s positive or negative.
Jaryd Krause:
It really depends. On the update, and it really depends on the nation of the site.
So sometimes you can have a huge spike down. Or it can be a gradual one, in terms of like, what would I do to a site that has been affected heavily by an algorithm update is kind of look at the overall SEO profile of the website, like the domain authority, the level of content, it has the rankings of those articles, and pages and kind of see like, Hey, can I bring this around?
To the opposite side of why the site was actually affected? And most often it’s a no, I don’t want to catch a falling knife or I tell my clients, we don’t want to catch a falling knife.
Okay. But if it is, if it is something that’s the person who’s purchased, the site is very confident in their SEO skills and their content marketing skills.
And they’re very certain like in Reverse that then, by all means that’s that’s like an opportunity. Like, some problems are just opportunities in disguise.
So it is quite business dependent. Mm hmm. Yeah. So sorry, we dig a bit off the due diligence. But did you want me to keep going? Or did you have more questions within that?
Backlinks Removed on Bought Sites
Ilana:
I just had a question within the SEO side of things. I mean, as you know, I’m a paid traffic person.
But I tell people I know enough about SEO to be dangerous. Yeah, I know it means an SEO expert. But what about situations?
I know lots of SEO people build links to a site in order to get it to rank. What about a situation where you know, somebody’s selling a site that’s ranking, they sell the site, and then they remove those links, is there a way of detecting that might happen?
Jaryd Krause:
Yeah, so this is such a juicy question, and I’m very similar. Have you heard that just everybody knows a bit of a disclaimer? I know enough to be dangerous as well.
But I’m not an expert in SEO. Yeah, such a good juicy question this one like, if you’re you want to do, you do want to look into the links the backlink profile of the website before you purchase it and see you know, what sort of links are coming in and bringing traffic to the site.
And then asking the seller, if any of those are paid links, because sometimes, you know, you might need to keep paying for the link.
Or it might be attached to a PBN which is a private blog network with this which is basically a syndication of different blogs that will be linking into the site to boost its, you know, boost its traffic out but sometimes those PBN’s are non relevant links with sending non relevant traffic which can decrease your bounce rate and time on page which decreases your overall SEO profile.
But getting to that question of like, what happens like is there a way to prevent the owner being affected or the new owner yourself being affected by a link being removed and decreasing rankings is if it’s a paid link, then you want to know if it’s paid and then keep paying I guess, until you can get enough traffic to warrant removing that link and putting a different link in place instead.
That’s what my suggestion would be in terms of people that have bought sites and they’ve got a couple of good articles that are ranking quite high.
And I’ve had this happen to a client of mine, he bought a site where a few of these articles were ranking quite high, bringing in most of his traffic, and he dipped from a Google PageRank one to two and lost a lot of traffic and then what he had to do wasn’t because of a backlink, it was because of a competitor had built out another article which was superior, so we had to just leapfrog them again.
But in terms of the question with the backlink, I would say, if you’re paying for it, then you can keep paying for it and keep that. But the backlink isn’t the only thing that’s gonna help you get ranked for. That makes sense like it could.
It could drop your rankings but that may not be the only thing that’s causing that and if it did drop your rankings look for a backlink that’s superior to the previous one. So you can get your rankings backup. Yeah.
Ilana:
What tool do you use to really evaluate the backlinks and the general authority of those backlinks?
Jaryd Krause:
So SemRush and ahrefs are the two ones that I recommend people go away and use.
Ilana:
Do you need both of them or would SemRush is enough?
Jaryd Krause:
Yeah, SemRush is what I recommend most people go to SemRush. And it’s basically very, very similar, their competitor so…
Ilana:
Yeah. Interesting. Okay. I guess it also raised an interesting point where if you know, predominantly most of their traffic is coming from, say one or two articles that if they lose those rankings on those articles, a significant portion of their traffic disappears.
Therein lies the risk of you know, you know, all that due diligence that you’d need to do to say, yes, it is most of the traffic coming from one or two pages, therefore, you’re at risk of losing those rankings and therefore all your traffic, you know.
Jaryd Krause:
Yeah, that’s right. Like you could, you could lose, you know, if you got two pages, bringing 50% of the traffic Ah, you know, that’s a huge risk.
And so many people. I think, a lot of people that are into niche content websites or any sort of content websites is that there’s so heavy into that space and getting traffic and organic but and it’s becomes a normality that to have a couple of pages bringing most of the traffic and they forget that there’s, I believe that they forget that there’s a better approach.
And that’s why I’m huge on telling people to build out an email list in case you lose rankings, then you don’t need to lose traffic because you can still send them to your website.
And then also, instead of just focusing on those top two articles, say for example, a site does have those top two articles, you know, focus on refining existing content and bring that up to scratch to a point where you’re on, you’re leaning on those two key pillar posts or articles.
You’ve got some backup ones that are bringing in a good chunk of traffic as well.
Importance of Email List
Ilana:
Yeah. Interestingly, let’s say you encounter a business that does not have an email list. Are they valued lower because of that or does almost not even come into play.
Jaryd Krause:
It does come into play, but they a broker wouldn’t focus on that they wouldn’t say, hey, this business is discounted because it doesn’t have an email list that would just say, Hey, this is a good business because it doesn’t have an email list.
It’s a good opportunity, they said, then flipped it around. I certainly, um, my, my belief is that a business is far more valuable with an email list. And so even if somebody was to buy a business, and they left at the exact assignment but they built out a thriving email list that’s highly engaged and has great open rates about businesses value would be a lot higher.
If nothing else changed except for the list, and you put it back on the market.
Ilana:
I mean, you’re preaching to the converted here. I completely agree it is so it’s not a leading question that was big for them. Yeah, like I agree. Like I see so many classes. 10 affiliate sites that have no email opt ins, I think you guys are crazy, like, such a missed opportunity.
And I mean, like I deal with paid traffic, obviously, you know what I live and breathe. But still regardless, I still have access to so many people’s Google Analytics and regardless of all our paid traffic endeavors by far and away the highest converting traffic source for pretty much all our clients in TeachTraffic.com on my agency is email.
Jaryd Krause:
I’m so glad we’re talking about this because email is everything. Even if I was to not have a content driven business or a content site, and I was to just be in business selling any product or service? If I could not have an email list, I would probably not be in business.
Ilana:
Totally! Hundred percent. Yeah. amazing way to communicate with your audience and to really develop that relationship.
And funny and all my emails that I send to my database, I encourage people to reply to my emails and people do and I love it and I’d start engaging in a chat with them, you know about whatever they’re doing and working on and it’s such an amazing way to, to communicate with people, and I’ll even have some people reply going.
Is this really gonna go to you? Like, yes, it is. I have a person and I will respond. It’s pretty funny.
Okay, so let’s get back to what we’ve been talking about.
You mentioned the four elements that you look for in terms of due diligence. So we’ve obviously touched on SEO. What about marketing? I guess maybe that email database falls under that. The third thing you mentioned was financial. Do you want to maybe touch on that a little bit?
Financial Due Diligence
Jaryd Krause:
Yeah, for sure. And If you’d like to touch on marketing bit data we can as well, because you know, paid, traffic’s huge here, but let’s just quickly run over the financial ones.
When you come in to buy a business, you know, traditionally anything under the 50 k range or 100 k range, people will just send you an Excel sheet with their P&L, and sometimes screenshots of the zero account or QuickBooks or whatever people are using around the world.
And it’s just I really want to stress on this point that it’s not good enough, because people can just put any old figure into that Excel sheet and that’s a screenshot with I could have butchered the numbers.
Find it really important to have viewers access the business’s merchant account and see if you can get viewers access or do a screen share with their business bank account and cross reference all the numbers that’s so, so important.
And if it gets to a point where you know the numbers are too much for you to be confident in then have you know somebody, like an accountant, look over it for you and verify all of that. That’s so important.
Like a lot of people were just like, yep, cool. It’s making money. I see some screenshots and it’s just not. It’s not the best way to verify your financials.
Also, there’s so many questions within the business. So I’ve had somebody that I know somebody who’s gone and bought a business before and they did so many sales like the business, it’s certainly sales leading up to the sale of the business.
So they made a bunch of revenue, but they didn’t include the expenses. And yeah, just ridiculous, right? And the poor guy asked to say like, Hey, I just want to confirm that there’s no additional expenses or there’s nothing, you know, being paid for that’s, you know, contributing to the sales.
Can you just confirm that verify that and and the person lied. So they bought the business from exchangemarketplace.com, which is where people can list their Shopify sites for sale.
And yeah, I bought this site and the business is making money, so little bit of money, which is good. He owns it, but he’s just, it’s, it’s been a bad experience for him because that person just lied.
He didn’t go and verify that and check it and it sucks. So yeah, you need to just be verifying these things, guys.
Marketing Side of Due Diligence
Ilana:
Yeah, for sure. big lesson. Did you want to, excuse me, touch on something with the marketing aspect, which you said?
Jaryd Krause:
Yeah, for sure. Like with marketing, it’s the same question as you asking throughout all of digital and the SEO, SEO as well as like, what’s working, what’s not working, and why.
So digging in, like if you can get like fuse access of the Like I’ve sold a business where I gave us access to my Google Ads account. And you can give that access to Facebook ads accounts and all your different ad accounts and, and only catalytics, analytics, everything.
So and you sign an NDA so you’re not going to use that, you know that data to your advantage.
And you can go away and look at if you’re a digital marketer and you’re highly effective in digital marketing have been for other businesses, you can go in and look at the marketing strategy, their ads, and this is what you do Ilana is you can go and look in and be like, “Alright, cool”.
This is what they’re doing well. This is what they’re not doing well. And they’re in lies some of the low hanging fruits itself.
Competition of the Website in Terms of its Industry
Ilana:
Cool. All righty. What about competition? Do you like an industry which is really competitive or not much at all or it depends.
Jaryd Krause:
Again, guess it depends on the business and the niche. What they’re selling.
If there’s some if there’s a, you know, I’m looking at mainly direct competitors, not indirect competitors, so direct competitors to people that are selling the same types of products and services, and solely selling those ones as you if you’re purchasing that particular business.
And so I would say, I’d like to see other competitions and just see what they’re doing well and see what they’re not doing well. And then it’s kind of like when you go away and look at other people’s marketing campaigns and ads and stuff like that you can kind of like to model what they’re doing.
And that’s a big part of the thing that I look at when buying a site is I look at the competitors and say, All right, cool. What is the business that I’m looking at buying, not doing and how hard would it be to replicate what that other competitor is doing?
And I will try and do it like, do I need to be spending, you know, 10 million a year on paid ads. They get there compared to like, you know, hardly any maybe only 100K or something a year.
So really seeing what the big gap is, and seeing how you could bridge the gap. And if it’s a possibility at all.
Jaryd’s Advice to Beginners in the Buying Space
Ilana:
If you were starting out from scratch, you know, you never bought a site before. What? What would you do? Like what? What type of site would you buy? I know it depends on your skill set. But I guess yeah, like, what advice would you give somebody who’s never bought a site? before? It’s kind of where I’m going with this question.
Jaryd Krause:
Yeah, that’s a good one. It’s, if you’ve never bought a website before with this, and it also does depend on your skill set as well and your financial background, so it is quite individual, but if you’ve never bought a website before, I’d say definitely start off at the lower end of the spectrum, right buy something around the 20 to 50 k range.
And, and learn how to run that business, learn how to do the marketing or the SEO, and learn those skills and even hire a VA. And then slowly work your way up, build that up a bit, and then you can either keep it or sell it, and then buy something bigger, but I’d start off at a smaller you know, financial mark in between that 20 to 50 k range.
And I wouldn’t try and not do something that’s a difficult business to run. Content websites are very simple to run. You just need to produce great content, like it depends on how deep you want to get into that.
Like if you’re going to pay for all the tools like SemRush, ahrefs and Market Muse and all these, you know, a big expensive content marketing strategy, but if you just wanted to, you know, follow what the previous owner was doing it was working.
It’d be a pretty simple and easy business to run. I would I really advise those who are looking at buying an e-commerce website have zero marketing experience to not go down that route unless they’re committed to paying a lot of money and spending a lot of time on becoming a great Digital Marketer because the competition in e commerce is only getting fiercer and fiercer actually in all online businesses.
And if you’re coming up against somebody that’s got some skills with marketing, you’re gonna have a really tough time in that business.
How Business Are Valued at Certain Price Points
Ilana:
Yeah, for sure. So you mentioned the lower end of the market, the 20 to 50K, let’s sort of touch on the various price points. There are sort of a good segue to that.
And I guess the multiples that people use to get to those price points. I mean, For some people 20 k is a lot of money, especially to throw in to something that could be perceived as a bit of a gamble.
Excuse me, if it’s gonna work, though, how do people get to those price points? You know, yet we’re about to touch on that.
Jaryd Krause:
Yeah, yeah. So how the business is valued at those price points you, man. Yeah. Yeah. So you’re right, like 20k is a decent sum of money.
And most of these are in US dollars as well. And then when you get up to 50K and 100K, it can be you know, it can be getting up there.
And if somebody is buying a business for 50k cash, it’s a huge fee. So, you know, pat yourself on the back for that.
So how do people get to that price range now?
Content websites have a different multiple to some e-commerce websites and then the highest multiple out of them all. I like SaaS. And membership type businesses because of the levels of risk.
Now, not a multiple will be via monthly months normally, normally it’s a monthly multiple in the website, or multiple of profit, revenue. Yeah, a multiple of net profit.
So how it’ll work would be for a content website. Save the business. Well, let’s just do round numbers right. So we’ll do a 100K. website, say a business for sale for 100K.
If you divide that by three, it’s normally like 36 months multiple, which is three years. So if you divide that by three and then divide that by 12, normally a 100k website will be making $2700 net profit per month.
So what the website brokers do is they get the business and I work out what their average monthly net profit is.
Normally it’ll be over 12 months and that’s what I’d suggest they value the net profit average out over. Sometimes what they do is they see the best three to six months.
And they might call the best four months have been these four months and we’re gonna average we’re gonna make the average net profit from those three to four months and then now times their multiple by that average net profit.
So that’s a little trick and a tactic that they may use to value the business. So then they might go. I call a content website, maybe all right, roughly around 30 multiples of 30.
Right so they’ll get the average monthly net profit and times that by 30. And that will be the price of the business and sometimes I might say this business has two articles, like we mentioned before , that are ranked and bring most of the traffic.
And that could be a little bit of a risk. So they may bring that down a bit. Right.
And that may if it has a good email list, I may bump it up a little bit like put an extra multiple on a Mega 32.
So it really depends on the business with the multiple that they put on it.
Ilana:
Right…
Jaryd Krause:
Does that make sense? Or is that very confusing?
Ilana:
No, no, it does make sense.
To me it feels quite high, like based on 36 months or three years worth of profit is that given there are so many risks given that you are at the mercy really of Google ranking you at an algo potential algorithm updates etc? I mean, maybe I’m completely off he you know, am I off?
I don’t know if that feels high to you, like it will take you three years to pay off that investment, basically.
Jaryd Krause:
If you did nothing, that’s right. So normally it’s roughly a 20 to 30% return on your investment per year.
Now, that is an amazing ROI. But you’re right, there’s those risks they’re involved with, you know, being heavily reliant on Google.
So if you’re gonna, and we’ve seen content websites sell for up to a multiple of, you know, 36 to 40 and 42. Even.
So, and there’s those content websites are the ones that have a lot of great keywords ranking, a lot of great articles ranking. They don’t have they’re not relying on just one affiliate like Amazon, that they got multiple affiliates, and they’re not through an affiliate commission program.
They’ve gone directly to the retailers and become an affiliate with them. So they’ve decreased their risk a lot with the spread of traffic, also with a spread of income diversification They may have a really good email list that’s thriving as well. And their brand is quite good.
And the audience, you know, the bounce rates high and the time on page is quite high. That is an exceptional business that is worthy, in my opinion of, you know, 30 plus 36 plus multiple because it’s a lot easier to maintain.
And you’ve got this platform that, you know, you can add some content marketing skills to or paid traffic paid traffic skills to as well. And it’s the same with an e commerce website business, right?
If it’s a very niche product, and it’s doing great and the marketing funnels have been working for a long time without any tweaks, I’ve got a good email list, abandoned cart, email sequence, and all that sort of stuff.
All those things stack up and they make the business better and better. Yeah. One thing that I tell people is that, you know, you get what you pay for. And, like, because I used to be a plumber, I use this analogy.
If you’re going to go and buy a tape measure from crazy clocks or a discount store for a couple of dollars is only going to last you so long and it’s going to decay and break down and it’s going to be hard to use and you’re going to get a bad return on your investment.
But if you go and buy like a $50 type measure, you are going to have that for a lot longer and your ROI is going to be so much higher. One of one of the things that Warren Buffett says who’s the most successful business investor in the world is he says it’s better to buy a good business at a fair price than a fair business at a good price.
Where To Buy and Sell Websites
Ilana:
I totally agree with that.
If somebody has listened to this episode of things. Yep. OK. I want to explore this option. Where is somewhere that they could go to to find businesses so that they could buy?
Jaryd Krause:
So there’s so many places. If you type into Google: “Website Brokers”, check that out for the first time, as I suggest, going to Website Brokers.
You got Empire Flippers, FE International, Investors.Club, MOCEANInvest.com, Quiet Light Brokerage. There’s so many. I like those. Those are probably the top picks off the top of my head.
Learn More About Jaryd Krause
Ilana:
Cool. Awesome. Yeah, well, I’m mindful of the time, so. Thank you so much for coming on today’s episode. For the listeners that kind of want to find out more about you and the products/services that you offer, where can people find out more about you?
Jaryd Krause:
Sure. Thank you so much as well for having me, it’s OK. I’ve had a great time today going deep as well as really good. So, yeah, you can just find…
Ilana:
Feel like we could do part two, to be honest. Like, I’m just watching the clock here that I’ve got actually a whole other question that I can ask you anyway.
Jaryd Krause:
Maybe we can. I know that where you’re going to come on my podcast.
So maybe if we don’t do another one we can keep on rolling with this. It’s been fun.
Yeah. So if you want to check out, you know, more about my stuff, just go to BuyingOnlineBusinesses.com.
So “Buying Online Businesses”, plural. I can see the podcast. We’ve been ranked in the top three best passive income podcasts online, so you can check that out.
And that’s just the free content to check out. And if people vibe with it. Awesome. If they don’t, awesome as well. It’s not their thing. And they can say in your podcast. And you can help them with their products.
Ilana:
Sounds good. Jaryd, thank you so much for taking time out of your day and coming on. Really appreciate it. And yeah, I’m looking forward to going on yours.
Jaryd Krause:
Yeah, me too. That’s gonna be great fun. Thank you.